Through the Department of Housing and Urban Development (HUD), there are several types of loans that you can apply for. Other government branches, such as the Department of Veterans Affairs (VA), have loans available for veterans as well. In addition to loans to help you buy a home, the government also provides financing for other related needs, such as home repairs.
When comparing government loans, remember that this type of financing is different from loans offered by private companies. Deciding whether a government loan or private financing is better for you will depend on your circumstances and individual needs. Furthermore, some government loans have specific eligibility criteria that may not apply to everyone. Below, learn more about the different types of loans you can qualify for as well as what they offer.
Federal Housing Administration (FHA) Loans
The Federal Housing Administration (FHA) is responsible for overseeing most types of loans offered through HUD and the housing assistance programs they are responsible for. The FHA works with certain lenders who are authorized to provide financing under this program.
FHA loans can be used if you wish to purchase a single-family home. To qualify for this type of loan, you must meet the down payment requirements, pass a credit check and be able to pay a monthly mortgage. Getting an FHA loan requires that you apply for financing through an FHA-approved lender. Because private mortgage companies provide these loans, you must follow the application steps required by the lender.
The benefit of using an FHA loan over conventional financing is you typically can make a lower down payment while also enjoying lower closing costs. Therefore, FHA loans are a great option if you have a poor credit score or do not have enough money saved to make a substantial down payment.
Other HUD Loan Opportunities
If you meet certain criteria, you can qualify for special types of FHA loans. First, the Good Neighbor Next Door (GNND) low-cost housing program is available for teachers, firefighters and emergency medical technicians (EMTs). Through GNND, you can receive a 50 percent discount on approved HUD homes as long as you commit to living in the home for at least 36 months.
Another type of financing is the Section 184 Indian Home Loan Guarantee Program, which is available to American Indians and Native Alaskans who need access to affordable housing in their communities. Section 184 financing allows borrowers to get a home with a low down payment through a participating lender.
Home and Property Disaster Loans
If you are already a homeowner, one of the best types of loans to familiarize yourself with is a home and property disaster loan from the Small Business Administration (SBA). Through this program, you can apply for up to $200,000 to repair your home after a natural disaster such as a flood, fire or hurricane. These loans are only meant to be used to repair your home to its pre-disaster condition, not make upgrades or additions that were not there before.
Home Improvement Loans
While home and property disaster loans cannot be used to make new improvements, there are other loans that can. Examples of these loans include:
- HUD Title 1 Property Improvement Loans, which can be used to make alterations, improvements or repairs to homes that meet the program requirements or to finance a new construction.
- The 203(k) Rehabilitation Home Mortgage Program, which allows you to add up to $35,000 into your mortgage for the purpose of covering repairs, improvements or issues identified by a home inspector.
Veteran Home Loans
If you are a veteran, you may qualify for even more types of loans from the government. Home loans offered by the VA include:
- Purchase loans, which help you buy a new home with a guarantee from the VA, oftentimes without having to make a down payment.
- Native American Direct Loans (NADLs), which may help you buy, build or restore a home that is located on Federal Trust Land if you are a Native American veteran or are married to one.
- Interest Rate Reduction Refinance Loans (IRRRLs), which help you get a more affordable monthly payment if you currently have a VA-backed home loan.
- Cash-Out Refinance Loans, which allow you to borrow against your home equity to pay for essentials such as debt consolidation, school or medical needs.